Google's motion for summary judgement was granted on the grounds that the Digital Millennium Copyright Act's "safe harbor" provisions shielded Google from Viacom’s copyright infringement claims, but was later overturned in part, and the case remains pending.

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On March 13, 2007, Viacom filed a US$1 billion lawsuit against Google and YouTube alleging that the site had engaged in "brazen" copyright infringement by allowing users to upload and view copyrighted material owned by Viacom.[1] The complaint stated that over 150,000 unauthorized clips of Viacom's (Viacom's) programming, such as SpongeBob SquarePants and The Daily Show, had been made available on YouTube, and that these clips had collectively been viewed more than 1.5 billion times.

Viacom claimed that YouTube had infringed on its copyrights by performing, displaying, and reproducing Viacom's copyrighted works. Furthermore, the complaint contended that the defendants "engage in, promote and induce" the infringement, and that they had deliberately built up a library of infringing works in order to increase the site's traffic (and advertising revenue).[1] In total, Viacom claimed three counts of direct infringement, and three counts of indirect infringement, specifically inducement, contributory infringement and vicarious infringement.[5]

Viacom did not seek damages for any actions after Google put its Content ID filtering system in place in early 2008.[6] The lawsuit was later merged with similar complaints being pursued by the English Premier League and other copyright holders.[7]

In July 2008, during the pre-trial discovery phase, Viacom won a court ruling requiring YouTube to hand over data detailing the viewing habits of every user who had ever watched videos on the site. The move led to concerns that the viewing habits of individual users could be identified through a combination of their IP addresses and log in names. The decision was criticized by the Electronic Frontier Foundation, which called the court ruling "a setback to privacy rights,"[8] and privacy advocates such as Simon Davies, who stated that the privacy of millions of YouTube users was threatened.[9] Judge Louis Stanton dismissed the privacy concerns as "speculative", and ordered YouTube to hand over documents totaling around 12 terabytes of data.[10] Judge Stanton held that because YouTube is not a "video tape service provider" as defined in the Video Privacy Protection Act, its users' data was not protected under the act. However, Judge Stanton rejected Viacom's request that YouTube hand over the source code of its search engine, saying that it was a "trade secret". As a result, many users began posting videos under the group name "Viacom Sucks!", often containing large amounts of profanity.[9]

However, later in July 2008, Google and Viacom agreed to allow Google to anonymize all the data before handing it over to Viacom.[11] The privacy deal also applied to other litigants including the English Premier League, the Rodgers and Hammerstein Organization and the Scottish Premier League.[12] However, the deal excepted employees of both the defendants and the plaintiffs, whose de-anonymized data was provided separately.

The employee data was later used in filings by both sides. Viacom cited internal emails sent among YouTube's founders discussing how to deal with clips uploaded to YouTube that were obviously the property of major media conglomerates. Google on the other hand stated that Viacom itself had "hired no fewer than 18 different marketing agencies to upload its content to the site".[13] Given this, Google argued that since Viacom and its lawyers were "unable to recognize that dozens of the clips alleged as infringements in this case were uploaded to YouTube with Viacom’s express authorization," that it was unreasonable to expect Google's employees to know which videos were uploaded without permission.[14]

Google's chief counsel later publicly elaborated on the allegations:

For years, Viacom continuously and secretly uploaded its content to YouTube, even while publicly complaining about its presence there. It hired no fewer than 18 different marketing agencies to upload its content to the site. It deliberately "roughed up" the videos to make them look stolen or leaked. It opened YouTube accounts using phony email addresses. It even sent employees to Kinko's to upload clips from computers that couldn't be traced to Viacom. And in an effort to promote its own shows, as a matter of company policy Viacom routinely left up clips from shows that had been uploaded to YouTube by ordinary users. Executives as high up as the president of Comedy Central and the head of MTV Networks felt "very strongly" that clips from shows like The Daily Show and The Colbert Report should remain on YouTube.Viacom's efforts to disguise its promotional use of YouTube worked so well that even its own employees could not keep track of everything it was posting or leaving up on the site. As a result, on countless occasions Viacom demanded the removal of clips that it had uploaded to YouTube, only to return later to sheepishly ask for their reinstatement. In fact, some of the very clips that Viacom is suing us over were actually uploaded by Viacom itself.

On June 23, 2010, Judge Stanton ruled in Google's favor on a motion for summary judgment, holding that Google was protected by provisions of the Digital Millennium Copyright Act, notwithstanding evidence of intentional copyright infringement.[2][7] The judge held that while the company undeniably had general knowledge that some copyrighted material had been uploaded by users, it did not know which clips had been uploaded with permission and which had not.[6] He also said that mandating video-sharing sites to proactively police every uploaded video “would contravene the structure and operation of the D.M.C.A.”[6] As evidence that the notification regime specified by the DMCA was effective, Judge Stanton noted that YouTube had successfully addressed a mass take-down notice issued by Viacom in 2007. The judge rejected Viacom's comparisons between YouTube and other Internet-based, media-sharing companies, such as Grokster, that had previously been found guilty of indirect copyright infringement.[6] The ruling also reversed the previous court order issued in July 2008.

The appeal was argued before the United States Court of Appeals for the Second Circuit in August 2011, and was decided April 5, 2012.[16] Among other things, Viacom and the other plaintiffs focused on internal emails among YouTube employees who were aware of infringement, including specific instances, which the district court said could be considered knowledge that would disqualify YouTube from safe harbor protection.[17][18][19]

Judges Cabranes and Livingston reversed Judge Stanton's grant of summary judgment,[20] holding that "a reasonable jury could find that YouTube had actual knowledge or awareness of specific infringing activity on its website"[21] and, contrary to the Ninth Circuit's dismissal of the Veoh case (UMG v. Shelter Partners), that the right and ability to control infringing activity need not require knowledge of specific infringements.[16] Thus, the case is again eligible for a jury trial.[17]

However, the court upheld one aspect of Stanton's ruling. The plaintiffs had argued that four of YouTube's software functions relating to user uploads disqualified the service from safe harbor protection, but the appeals court agreed with the lower court in that three of the functions—transcoding, playback, and related-video thumbnails[17]— were within the scope of safe harbor.[16] The fourth function, syndication,[17] was remanded for further fact-finding.[16][22]

On April 18, 2013, judge Stanton issued another order granting summary judgment in favor of YouTube.[3] Following the remand from the Second Circuit court of appeals, judge Stanton ruled on four issues in his decision:

Judge Stanton ruled in favor of YouTube on all four issues finding that YouTube had no actual knowledge of any specific instance of infringement of Viacom's works, and therefore could not have "willfully blinded itself".

Further, the court found that YouTube did not have the “right and ability to control” infringing activity because "there is no evidence that YouTube induced its users to submit infringing videos, provided users with detailed instructions about what content to upload or edited their content, prescreened submissions for quality, steered users to infringing videos, or otherwise interacted with infringing users to a point where it might be said to have participated in their activity."[3] This ruling came despite statements made by YouTube employees that "[we should grow] as aggressively as we can through whatever tactics, however evil.… [the site is] out of control with copyrighted material … [if we remove] the obviously copyright infringing stuff … site traffic [would] drop to maybe 20% … steal it!"[23] All quotations were argued to be taken out of context. The ruling was entered as final on April 29, 2013.[4]

An appeal was begun, but the week before the parties were to appear in the 2nd U.S. Circuit Court of Appeals, a settlement was announced, and it was reported that no money changed hands.[24]